QuickBooks is a great tool, but if you don’t use it properly, you may not have a true picture of your business’s financial health. Here are the most common errors and how to avoid them.
1. Payments Double Counted
Not logging the payments you receive from customers properly can end up doubling your income on paper and throwing off your receivables aging. Here’s how it happens.
????????????? You enter the payment as a deposit to your bank account.
????????????? You later notice that an invoice is marked as unpaid when you know it was paid, so you mark it as paid.
????????????? Both the first and second steps increase your sales total, so QuickBooks is now telling you you made twice as much money as you really did.
Instead, always start with the receive payments button when you’re manually entering payments. This will allow you to match your deposits with customer invoices to make sure your invoices are updated properly.
2. Duplicate or Missing Bank and Credit Card Transactions
One of the best features of QuickBooks is that it automatically pulls in most of your transactions. However, it’s not perfect. It may occasionally miss transactions or not categorize them properly. Duplicate transactions happen when QuickBooks doesn’t match a transaction it imported to a transaction you entered manually.
To avoid having the above errors throw off your books, you need to reconcile your bank statements at least monthly.
3. Negative Inventory
Negative inventory numbers usually mean one of two things. Either you’ve sold more than you have on hand or you aren’t entering purchases correctly.
QuickBooks will not automatically keep you from overselling. If you need that functionality, you’ll want to find a separate inventory management system that ties into QuickBooks.
If you physically had the inventory on hand and just didn’t enter the purchases into QuickBooks, the fix is easy. Add the purchases as of the date you made them, and QuickBooks will automatically connect that inventory to your sales based on your chosen inventory method.
4. Not Properly Categorizing Expenses
Not having expenses in the right categories may not affect your overall profit and loss numbers, but it will cause problems at tax time.
For example, you don’t want to have a single office expense category with rent, utilities, and office supplies. Even if you generally use the cash method, you may need to split out advanced rent payments that aren’t immediately deductible. You may also wish to expense office supplies immediately for simplicity while keeping utilities on a strict accrual basis.
Another area to look at is meals and entertainment. With the new tax law severely restricting these deductions, you may need to break this category into deductible and non-deductible transactions.
5. Not Tying Expenses to Product and Services List
When you create products and services, you need to select both an income account and an expense account. Unless you truly have no expenses on a sale, not having the expense account tied may throw off your inventory or job costing numbers.
This is commonly missed because the income, expense, and inventory accounts don’t show on your products and services page by default. Be sure to update your settings so that they do show up and you can accurately track your expenses and inventory.
Need more help? QuickBooks is designed so that anyone can learn how to use it, but sometimes your time is better spent growing your profits. Contact us to learn more about how our bookkeeping services can help you avoid errors and s